BMC Software Earnings Call Insights: Attrition, Sales Force

On Wednesday, BMC Software, Inc. (NASDAQ:BMC) reported its fourth quarter earnings and discussed the following topics in its earnings conference call. Here’s what the C-suite revealed.

Attrition

Philip Rueppel – Wells Fargo Securities: Couple things. First, around the sales force, you mentioned the momentum you had in the fourth quarter in terms of hiring, etc. Can you talk about any major changes that you – I know it’s been a process over the last few quarters, but any major changes headed into 2013? Is the sales force being segmented differently? Are comp plans significantly different? And have you seen attrition pickup after the end of your fiscal year so far in Q1?

A Closer Look: BMC Earnings Cheat Sheet>>

Robert E. Beauchamp – Chairman and CEO: Yeah. Let me answer that in reverse order, Phil. Actually it’s the opposite. April was very encouraging in terms of attrition. You always expect to see some bump because the year is over, but in fact we saw the opposite. The attrition in April was about a third quarter of what it was in April, a year ago, and so there is really – and it’s not just the numbers, there’s the feel. We just finished our sales kickoff events for worldwide we had two events, and both of them there’s just a lot of very positive energy, a lot of feedback from the sales force is that things feel really good. One of the reasons for that by the way is we have the quota letters out everywhere except for a few countries where we have to – where there’s Works Councils and issues like that you have to work through to get them out, but other than a very few exceptions, we have all the quota letters out, we have the territories assigned, we have what our sales force tells me, I’m sure that there’s exceptions individuals, it’s felt that the territories and the quotas are much more reasonable in their minds. We flattened the compensation system so that people can make money kind of on the first dollar instead of kind of the very, very backend loaded plan that we had in the last three or four years. And so in general I think very strong feedback from our sales force that they like the changes that have happened as we have begun this year. And I think the attrition numbers, knock on wood, the attrition numbers look really positive as we start the year.

Philip Rueppel – Wells Fargo Securities: And then maybe for Steve. As we build out our models for 2013, is there anything from a seasonal perspective that will be unique either from a bookings or revenue perspective? I know the comps get a little bit easier in the second half, but anything unusual in terms of seasonality?

Stephen B. Solcher – SVP and CFO: The one thing that I would talk about (skews) is, is that when you look at bookings and cash flow I would encourage everybody to really look at fiscal year ’11 and not fiscal year ’12 where we had an usually strong start to the fiscal year on Q1, and then for revenue and EPS I think it will follow very similar to fiscal year ’12. EPS will probably be a little bit more backend loaded, but in the most part I’d say the SKUs are going to follow the fiscal year ’12 actuals.

Sales Force

Philip Winslow – Credit Suisse: Bob, just wondering if you could provide some more clarity on some of the changes that you are making in the sales force. On last call on the ESM side you talked about going towards more segmentation. Just wondering sort of what’s been done and where that stands right now?

Robert E. Beauchamp – Chairman and CEO: So, first, as was mentioned on the call, we grew total capacity by 20%. If you add Numara, their total capacity is up 25% from the same – from where we were one year ago right now. The segmentation model that we have begins in a traditional pyramid approach where we have strategic accounts at the top where let’s call it a dozen or two accounts – I don’t want to give you an exact number – but less than two dozen accounts are strategic accounts and they will be managed without the MSM, ESM construct in the eyes of the customer. They will have an account executive who will deal with them as their overall relationship manager and will – those quotas and generally custom quotas for those territories that we work with on a multi-year basis with the sales team. Beneath that you have our enterprise accounts where it’s fairly traditional model in terms of our sales quotas and then at the bottom you have our new commercial accounts, bottom of the pyramid you have our commercial accounts that the Numara acquisition is a foundation of where we’ve moved some of our products including Remedyforce, we’ve moved some sales people into that as well. This is a higher volume, lower-touch, lower cost to sales channel there. Now, if you want more specific details on counts and things like that, we’d probably need to take that offline and we can try to prepare something little more specific for you.